HMDA and Loan Secured by One Dwelling Used to Purchase Another Dwelling

Issue/Inquiry

The Bank is originating two loans to the same borrower. The first is to purchase seven residential condominium units, so it is HMDA-reportable. The second is secured by two separate residential condominium units already owned by the borrower, the proceeds of which will be used for the purchase of the seven residential condominiums. Is the second loan also HMDA-reportable?

Response Summary

The second loan is HMDA-reportable because it meets the definition of a “home purchase loan.”

Response Detail

Under HMDA, as implemented by Regulation C, a “home purchase loan” is defined as “a loan secured by and made for the purpose of purchasing a dwelling.” A “dwelling” is “residential structure” and includes a condominium unit. 12 CFR §1003.2.

In this case, the second loan is being used to purchase seven residential condominium units, but it is not being secured by the condominium units being purchased. Instead, it is secured by two residential condominium units already owned by the borrower. Is the second loan HMDA-reportable?

The official commentary states that a “home purchase loan” includes a loan secured by one dwelling and used to purchase another dwelling. 12 CFR §1003.2, Staff Commentary, 1003.2, home purchase loan – 1. This means that, as long as a loan is secured by a dwelling and is used to purchase a dwelling, it does not matter whether the dwelling securing the loan and the dwelling being purchased are the same.

Therefore, the second loan is HMDA-reportable as a home purchase loan, since it is secured by a dwelling and is being used to purchase a dwelling.

This entry was posted on Monday, December 4th, 2017 at 6:00 am.